# Overview

> Inventory is an optional module that can be included in your PurchasePlus plan, to help you further control and reduce your procurement costs by:

Source: https://www.purchaseplus.com/docs/for-purchasers/introduction-to-inventory

Markdown: https://www.purchaseplus.com/docs/for-purchasers/introduction-to-inventory.md

# Overview
Jump to:

-   [Introduction](#Introduction)
-   [What's included in the Inventory Module?](#WhatsIncluded)
-   [How stock is valued](#how-stock-is-valued)
-   Advanced
    -   [How POS Module Augments your Inventory Data](#InventoryPOS)
    -   [Negative Stock Levels setting](#negativestocklevels)

### What inventory is

Inventory is an optional module that can be included in your PurchasePlus plan, to help you further control and reduce your procurement costs by:

-   [Receiving Products from your Suppliers’ deliveries directly into your Inventory](/docs/for-purchasers/receive-goods-from-a-purchase-order), and start tracking your Stock Levels,
-   Maintaining oversight of the total dollar value of all Stock Items in your Stock Locations,
-   Accounting for Transfers of Stock Items between Locations (or other movements of Stock Items, e.g. Variances during Stocktakes),
-   Conducting periodic Stocktakes to verify the Stock Levels in these Locations.

If your Organization has enabled Inventory, then the **\[Inventory\]** area will be available in the side navigation bar: 

![Inventory Side Nav Options](/images/docs/for-purchasers/introduction-to-inventory-1.avif)

### What is included

The Inventory Module comes with four major features: **Stock Items, Stock Locations, Transfers, and Stocktakes.** We will dive deeper into each of these four features below.

#### Stock Items

A Stock Item is a [Product](/docs/for-purchasers/introduction-to-products) that is available in your Inventory and can be added to and held in one or more of your Inventory Stock Locations. 

![All Stock Items view in PurchasePlus](/images/docs/for-purchasers/introduction-to-inventory-2.avif)

As a Stock Item, you will be able to receive [Purchase Order](/docs/for-purchasers/introduction-to-purchase-orders) items against it, as well as include it in any [Transfers](/docs/for-purchasers/introduction-to-inventory-transfers), Collections, or Point of Sale Items. If your Organization Creates a New Stock Item, it will also appear as a product in their All Products area, and your Organization will be set as the owner of the product. 

_View our article about [Introduction to Stock Items](/docs/for-purchasers/introduction-to-inventory-stock-items) for more information._

#### Stock Locations and System Locations

A Stock Location can be representative of a physical location at your Organization where Stock Items are held.  Stock Locations can also be used as a Point of Origin or a Destination for a Stock Transfer, a Location to receive Stock Items into on a [Goods Receiving Note](/docs/for-purchasers/introduction-to-receiving-notes), and a Location where a Stocktake can be conducted. 

A System Location is a non-physical Location that is used for accounting purposes - e.g. transferring a Stock Item out of a Stock Location to a System Location to keep track of a variance during a [Stocktake](/docs/for-purchasers/introduction-to-inventory-stocktakes).

You can view Stock and System Locations in their own pages under the **\[Inventory\]** heading in the side navigation bar:

![System Locations page](/images/docs/for-purchasers/introduction-to-inventory-3.avif)_View our article about [Introduction to Stock Locations](/docs/for-purchasers/introduction-to-inventory-stock-locations) for more information._

#### Transfers

A Transfer is a way to account for the movement of Stock Items between Stock and/or System Locations. 

A Transfer can be created manually at any time if the user has the ‘Manage Transfers’ permission, or they may be created automatically during certain actions - e.g. Receiving Goods, or during the initial setup of a Location's Opening Balances. 

Transfer Notes are created for each type of transfer, so that a detailed summary of the Transfer’s **Origin**, **Destination**, transferred **Stock Items** and other important information can be viewed.

![All Transfers view in PurchasePlus](/images/docs/for-purchasers/introduction-to-inventory-4.avif)_View our article about [Introduction to Transfers](/docs/for-purchasers/introduction-to-inventory-transfers) for more information._

#### Stocktakes

A Stocktake is a method of systematically verifying the quantity of Products that you are holding in a Stock Location. In PurchasePlus, a Stocktake is conducted at a Stock Location, and has a defined ‘Period’ (i.e. a calendar year and month). The Stocktake allows users at your Organization to count the **Actual** number of Stock Items in the Location, so that this count can then be compared to the **Expected** number of Stock Items in the Location. The variance between the **Actual** and the **Expected** count must be accounted for in a Variance Transfer, prior to the Stocktake being Closed.

![View a Stocktake in PurchasePlus](/images/docs/for-purchasers/introduction-to-inventory-5.avif)

The abilities to Manage and Close Stocktakes are controlled by user permissions, to ensure the quality of data in each Stocktake. 

_View our article about [Introduction to Stocktakes](/docs/for-purchasers/introduction-to-inventory-stocktakes) for more information._

### How stock is valued

In the world of inventory management and Enterprise Resource Planning (ERP), knowing exactly what your stock is worth can be a moving target; prices from suppliers can fluctuate regularly due to inflation, bulk discounts, or seasonal shifts.

  
To smooth out these fluctuations, most modern systems (including PurchasePlus) adopt the **Weighted Average Cost (WAC)** method. Unlike the FIFO (First-In, First-Out) method, which tracks specific batches, WAC blends the costs of all available units to create a single, 'weighted' unit price.

#### The Core Formula

To calculate the Stocked price accurately, you cannot simply average the unit prices (e.g., $10 and $20 does not necessarily mean an average of $15). You must also account for the **volume** of items purchased at each price point. 

Therefore, **Stocked Price = Total cost of inventory on hand / Total quantity on hand.**

##### **Real-World Inventory Sample: The Coffee Shop**

Let’s look at how an ERP system would calculate the value of Espresso Beans" over a month of shipments.

1.  **The Opening Stock**. You start the month with some leftover stock from the previous period.
    
    1.  Quantity: 50 kg
        
    2.  Unit Price: $12.00
        
    3.  Subtotal: $600.00
        
2.  **The** **New Shipment.** Mid-month, you buy more beans, but the supplier has raised the price.
    
    1.  Quantity: 150 kg
        
    2.  Unit Price: $15.00
        
    3.  Subtotal: $2,250.00
        
3.  **The WAC Calculation.** To find your new stocked price, the ERP combines these two 'batches' of Inventory:  
    

| **Item Source** | **Quantity** | **Unit Cost** | **Total Cost** |
| --- | --- | --- | --- |
| Opening Stock | 50kg | $12.00 | $600.00 |
| New Shipment | 150kg | $15.00 | $2250.00 |
| Totals | 200kg |  | $2850.00 |

    
    Applying the WAC formula:  
    **Stocked Price: $2850.00/200kg = $14.25**
    

##### Why Use WAC?

-   Consistency: It prevents 'profit spikes'. If you sold a bag of coffee for $30, your profit margin stays stable regardless of whether you happened to grab the 'cheap' bag or the 'expensive' bag from the shelf.
    
-   Simplicity: In high-volume environments (like a warehouse with thousands of identical bolts or screws), it is physically impossible to track which specific unit was bought at which price. WAC treats the inventory as a single pool.
    
-   Automated Accuracy: ERP and Inventory systems update this 'Stocked Price' every time a new Goods Received Note (GRN) is posted, ensuring your balance sheet is always up to date.
    

Tip: While WAC is great for general retail, hospitality and manufacturing, it might not be ideal for items with expiry dates or high-value unique goods (like jewelry), where tracking specific costs is more critical.

### How POS updates inventory

[Point of Sale (POS)](/docs/for-purchasers/introduction-to-point-of-sale) is an optional module that allows you to deduct [Stock Items](/docs/for-purchasers/introduction-to-inventory-stock-items) (or [Recipes](/docs/for-purchasers/introduction-to-recipes) containing Stock Items) from a [Stock Location](/docs/for-purchasers/introduction-to-inventory-stock-locations) when you make a sale in your restaurant, bar or cafe. Additionally, it allows you to keep a record of the Sale Data in PurchasePlus, allowing you to cross-reference Stock movements, sale prices, and more.

To implement the POS Module, your Organisation first needs to implement our [Inventory](/docs/for-purchasers/introduction-to-inventory) and [Recipes](/docs/for-purchasers/introduction-to-recipes) modules.

[Learn more about the PurchasePlus POS Module.](/docs/for-purchasers/introduction-to-point-of-sale)

### Negative Stock Level Setting

All Organisations using Inventory in PurchasePlus have the 'Allow Negative Stock Levels' setting enabled by default.

* * *

This is Part 1 of our Introduction to Inventory series. 

-   Read [Introduction to Inventory, Part 2: Stock Items](/docs/for-purchasers/introduction-to-inventory-stock-items)
-   Read [Introduction to Inventory, Part 3: Stock Locations](/docs/for-purchasers/introduction-to-inventory-stock-locations)
-   Read [Introduction to Inventory, Part 4: Transfers](/docs/for-purchasers/introduction-to-inventory-transfers)
-   Read [Introduction to Inventory, Part 5: Stocktakes](/docs/for-purchasers/introduction-to-inventory-stocktakes)

### Get started with Inventory

If your Organization would like to begin using the PurchasePlus Inventory module, please contact your Account Manager or [our friendly Customer Success Team](/docs/general/contact-purchaseplus-customer-success-team) for assistance with enabling the module, and to organize training for your users.

#### Note for Purchasers using Legacy PurchasePlus

The Inventory module in PurchasePlus has been redesigned, and is materially different to the Legacy PurchasePlus Inventory module. Organizations migrating from Legacy PurchasePlus to PurchasePlus will be given additional migration support.